Benchmarking - What The Business is Really Worth

There is only one way to accurately value a business and that is by comparing it with other businesses of the same type that have sold recently and have been sold in the close vicinity. Unfortunately there are no government statistics you can use to do this - not even actual sale prices. You can value a house fairly easily because the data exists about other, similar house sales in the area but there is nothing like this for businesses.

Accountants can't tell you much either, which surprises a lot of people. A lot of the time an accountant's valuation of a business is wrong - it simply doesn't relate to the true market value. Worse, the valuation is usually on the low side. This is mainly because accountants don't have enough comparisons to work with, so they can only use text-book methods of valuing businesses, which are at best only a starting point.

So how do you arrive at the real market value of the business you want to buy or sell?

We have all the information needed to do this. We have a massive data base accumulated over many years that includes the type of business, address, asking price, full selling price, plant and equipment (P/E) value, stock, turnover and net profit among all the other details you need to calculate a true rate of return on investment (ROI).

We benchmark every sale this way. It enables us to accurately compare that business with others of the same type which we have also sold over the years.

We have been collating this information about businesses for years and because we have sold so many more businesses than any other broker our data base is the only one that is big enough to make true comparisons on what a business is really worth.

We can show you exactly how good, say, a restaurant, manufacturing business, transport company or a panel-beating business really is compared with others we've sold in the region or in a specific area. This data base covers almost every type of business you can imagine and is amazingly accurate. So much so that we even can pick up any discrepancies in the figures, such as an imbalance between cost of goods sold and actual sales; or whether a business is under-performing or over-performing for its category.

This has huge advantages for both Vendors and Purchasers alike. Both parties can see exactly how the real value of the business has been arrived at, and that the asking price is a fair figure. This means a quicker, easier settlement, and it can also make it easier to raise finance for the purchase. The result is both a happy Vendor and a happy Purchaser.

And, more often than not, it results in the business being sold for a higher price than the Vendor's accountant estimated, but it is still at a figure that the Purchaser is happy to pay because we can prove with facts and figures just how good the business really is.

Of course other factors are sometimes involved. Someone might be prepared to pay a premium for a particular life-style business, (e.g. an easy, 5 evening a week office cleaning business), or for a particularly low-risk business like a Post Office or News agency or Childcare Centre. We can take these things into account too, much to the advantage of all concerned!

This information and service is only available to our clients and is yet another reason why more people choose to buy or sell a business through us rather than any other business broker or agent.